Global mobility employment contracts are agreements that outline the terms and conditions for employees working across international borders. These contracts are essential for ensuring compliance with employment laws in both the UK and the host country, while also addressing key aspects such as tax obligations, social security, and employee benefits.
UK employers face several risks when managing global mobility contracts. Legal and regulatory compliance is a major concern, as employment laws, tax requirements, and immigration rules can vary significantly between countries. Failure to adhere to these regulations can result in financial penalties, reputational damage, and operational disruptions.
Protecting the rights of employees while maintaining business objectives requires careful drafting of terms related to remuneration, working hours, and termination conditions. Currency fluctuations and differences in cost of living must also be considered to ensure fair compensation and financial stability for the employee.
UK businesses and their employees may understandably prefer to simplify matters by continuing their UK employment contract.
Unfortunately, this isn’t always a possibility. Many countries require foreign nationals working within their jurisdiction to obtain employment with a local entity.
Taxation and social security obligations present another challenge, with potential risks of double taxation and gaps in pension contributions. Employers need to address these issues to avoid financial strain for both the business and the employee.
Cultural differences, employment expectations, and duty of care obligations should be factored in to support employee well-being and productivity. A well-structured contract helps businesses manage risks effectively while supporting global operations.
Types of global mobility employment contracts
Different types of global mobility employment contracts are designed to suit the varying needs of businesses and employees involved in international assignments. The choice of contract depends on factors such as the duration of the assignment, the nature of the role, and the specific requirements of both the home and host countries. Employers must carefully select the appropriate contract type to ensure compliance with local employment laws, tax regulations, and social security obligations while also addressing the employee’s rights and expectations
Secondment
When transferring staff to a new country, maintaining the existing UK employment contract is often the preferred option for both employers and employees. This approach offers continuity, familiarity, and administrative ease. Where feasible, a letter of assignment can be issued to modify the employment contract, detailing the assignment terms, new responsibilities, and any changes applicable during the period abroad.
Secondments enable an employee to be temporarily assigned to work for the benefit of a foreign company while remaining employed by their UK-based employer. This arrangement helps preserve key benefits such as leave entitlements, pension contributions, and continuity of service, ensuring the employee remains under the protections of UK employment law.
Under a secondment arrangement, the host company typically reimburses the UK employer for the employee’s services, providing a clear financial structure while allowing the employee to benefit from the stability of their home employment terms.
However, employers have to assess tax and social security obligations in both jurisdictions, and to ensure compliance with immigration regulations in the host country.
Transfer
In many jurisdictions, host country immigration laws impose strict requirements on foreign workers, often necessitating the use of a local employment contract. For example, in the United Arab Emirates, a work permit application requires a standardised employment contract with a locally registered entity.
A host country employer may take various forms, such as a local subsidiary, a partner in a joint venture, or a local sponsor under regulatory requirements. UK businesses may opt to establish a legal entity in the host country to facilitate employee transfers, ensuring compliance with local labour laws and easing administrative burdens.
In addition, professional employer organisations (PEOs) operating in favourable tax jurisdictions can be leveraged to act as the employer of record. This approach can offer greater flexibility and reduce the complexities associated with direct employment in foreign jurisdictions.
Employers must carefully consider financial implications, including any statutory benefits, tax liabilities, and costs associated with contract termination when structuring an overseas transfer arrangement.
Dual Employment
Dual employment involves an employee holding concurrent employment contracts with both the UK employer and the host country entity. This structure is often used when an employee’s role benefits both organisations, requiring a shared allocation of responsibilities and costs.
While dual employment can provide flexibility, it introduces significant administrative challenges. Employers must carefully manage tax obligations, payroll processing, and compliance with employment laws in both jurisdictions. Clear agreements should be established to define each employer’s responsibilities and ensure proper coordination of benefits such as annual leave, social security contributions, and termination entitlements.
A lack of clarity in dual employment arrangements may lead to disputes over liabilities, with potential exposure to claims under both UK and host country employment laws. Employers must also ensure that the employee does not face double taxation or conflicting obligations under differing legal frameworks.
To mitigate risks, businesses should seek expert legal and tax advice when considering dual employment models and assess whether alternative structures, such as secondment or local employment, may better suit their needs.
Key considerations for employers
Expanding operations internationally presents numerous opportunities for businesses but also introduces complex challenges that employers must carefully manage. From tax obligations to employment law compliance, understanding the legal and practical considerations is essential to ensure smooth and compliant global mobility arrangements. Employers must take proactive steps to mitigate risks and safeguard both their interests and those of their employees.
Taxation
The type of employment contract implemented can significantly impact the tax obligations of both employees and employers. Some countries have tax treaty agreements with the UK, which can help prevent double taxation. However, in the absence of such treaties, both parties may be liable for taxation in more than one country.
For example, under US law, citizens are required to pay tax on all personal income regardless of where it is earned. Similarly, in India, income tax is levied on all services rendered within the country, even if the salary is paid by a foreign entity and received outside of India.
Employers must also consider local payroll compliance. Many jurisdictions require employees to be paid in the local currency and via a local payroll system. Failure to adhere to these requirements can result in penalties and compliance risks.
Taxation laws and rates vary significantly across jurisdictions, and employers must stay informed of any updates or changes that may affect their mobile workforce. Seeking expert tax advice and implementing a robust compliance framework are essential to managing these obligations effectively.
Employment Laws
When employees are transferred to a foreign entity under a local contract, the employment laws of the host country will typically apply. These laws govern key areas such as working conditions, termination rights, and statutory entitlements.
Significant variations exist between jurisdictions in areas such as health and safety standards, anti-discrimination policies, and employee benefits. Employers should carefully evaluate these differences and may choose to implement higher standards to align with their corporate values and protect their global reputation. For example, if a host country has weaker health and safety regulations, a UK employer may choose to impose stricter requirements to mitigate risks and maintain duty of care.
Training is an essential component when deploying employees to jurisdictions with different legal frameworks. Ensuring that expatriated staff understand local workplace regulations, cultural expectations, and compliance requirements can prevent legal issues and support a successful assignment.
Even when a UK employment contract is retained under a secondment arrangement, employees may still be subject to the employment laws of the host country in practice. Dual contract arrangements require careful structuring to address how employment laws from both jurisdictions interact, ensuring compliance without creating conflicting obligations.
Employers should work closely with legal professionals to establish contracts that provide clarity on jurisdictional applicability, dispute resolution mechanisms, and employee rights, balancing business objectives with regulatory compliance.
Need Assistance?
Despite the many benefits of a globally-mobile workforce, there is a range of issues that an employer must properly consider before sending employees abroad.
We are experienced advisers to employers on global mobility and the related legal issues. To find out how we can help you with your mobility needs, or to discuss a specific query, please contact us.
FAQs
What is a global mobility employment contract?
A global mobility employment contract is an agreement that sets out the terms and conditions for an employee who is assigned to work in another country. It covers areas such as salary, benefits, working conditions, tax responsibilities, and compliance with local employment laws.
Do UK employment laws apply to employees working abroad?
UK employment laws may still apply in certain situations, but the laws of the host country often take precedence. Employers need to consider jurisdictional differences and ensure compliance with both UK and local regulations to avoid legal complications.
What are the tax implications of sending employees overseas?
Employees working abroad may be subject to taxation in both the UK and the host country. Employers should assess double taxation agreements, payroll obligations, and social security contributions to avoid unexpected financial liabilities.
How can employers support employees working internationally?
Providing clear contractual terms, cultural training, relocation assistance, and ongoing support can help employees adjust to their new environment and remain productive. Duty of care responsibilities should also be taken into account.
What should be included in a global mobility contract?
Key elements include salary and allowances, duration of assignment, tax and social security arrangements, healthcare provisions, termination clauses, and dispute resolution mechanisms.
How can employers manage currency fluctuations in global assignments?
Employers may consider salary adjustments, exchange rate clauses, or payment in a stable currency to minimise financial uncertainty for the employee and the business.
What happens if an assignment is terminated early?
The contract should outline the process for early termination, including notice periods, financial settlements, and repatriation support if required. Clear terms help prevent disputes and ensure a smooth transition.
Glossary
| Term | Definition |
|---|---|
| Assignment Allowance | Additional financial support provided to employees working abroad to cover extra living costs. |
| Double Taxation Agreement (DTA) | A treaty between two countries to prevent individuals from being taxed twice on the same income. |
| Duty of Care | An employer’s legal and ethical responsibility to ensure the health, safety, and well-being of employees. |
| Expatriate (Expat) | An employee who is temporarily or permanently working in a country other than their home country. |
| Host Country | The country where the employee is assigned to work under the terms of the global mobility contract. |
| Home Country | The employee’s country of origin or the country where their employment contract was initially issued. |
| Immigration Compliance | Ensuring that employees meet the visa and work permit requirements of the host country. |
| Localisation | The process of adapting an expatriate’s contract to align with the employment terms of the host country. |
| Payroll Compliance | The requirement to adhere to tax and social security laws when processing employee wages abroad. |
| Permanent Establishment (PE) | A fixed place of business that could create tax obligations in the host country. |
| Relocation Package | Benefits provided to support the employee’s move, such as housing, travel, and schooling for dependants. |
| Repatriation | The process of returning an employee to their home country at the end of an assignment. |
| Social Security Contributions | Payments made by both employer and employee to fund benefits such as pensions and healthcare. |
| Tax Equalisation | A policy ensuring employees on international assignments pay the same tax as they would in their home country. |
| Work Permit | Official authorisation allowing an individual to work legally in a foreign country. |
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals
